EU: Financial transaction tax: Back on track (again)?
Bob van der Made
It is understood a number of meetings were held in the first half of January between French Finance Minister Sapin and French issuers, the French banking industry and non-governmental organisations (NGOs). Apparently, in a dramatic shift of position, France now supports a broader-based EU financial transaction tax (FTT) with a large range of financial instruments included in the scope, combined with lower tax rates. This move would align the French position more to that of Germany and the smaller ECP-11 member states (the countries participating in the enhanced cooperation procedure). At least one other big member state, Italy, is actively supporting the French on this initiative. Spain apparently is sitting on the fence. Although by mid-January no new documents or concrete compromise proposal had been circulated to the ECP-11, French President Hollande is intent on reaching an agreement on EU FTT with the ECP-11 as soon as possible in 2015.
Another not new, but revamped, French tax policy objective is to successfully complete the enhanced cooperation procedure on EU FTT, so enhanced cooperation procedures in other EU fiscal matters could also be initiated. It is understood that the EU Commission's CCCTB [common consolidated corporate tax base) proposal might for instance be a candidate for this, as there are rumours that the CCCTB proposal for a Directive would be cut up into three separate but inter-related pieces: first dealing with BEPS concerns (anti-abuse/GAAR), then the common base, then consolidation). France is apparently insisting on the fact that the ultimate goal is a harmonised FTT for the whole of the EU-28.
The timeline for the French plans for EU FTT would still be based on the political commitment made by the participating ECP-10/11 on May 6 2014, that is, the (first phase of the) FTT will enter into force by January 1 2016.
Apparently the plan is also to give the European Commission under the aegis of the French EU Tax Commissioner Pierre Moscovici a more active role in working out a final compromise text for the ECP-11, running data analyses and proposing ready-made amendments to the Commission's draft EU FTT Directive. This coordinating role is normally performed by the six-monthly rotating EU Council Presidency, however, none of the current or incoming EU presidencies until the second half of 2016 (Latvia, Luxembourg and The Netherlands) participates in the EU FTT ECP/enhanced cooperation procedure, so this would indeed be an effective way around any further delays.
The French shift is expected to make an ECP-11 deal on EU FTT more likely. There are still important aspects of the EU FTT to be resolved, such as the choice for the issuance or residence principle or a combination thereof, but the sense in Brussels is now that if the ECP-11 can agree on the scope, the other aspects may be agreed on, too, if there is a strong political will to do so.
In a joint letter issued on January 21, the French and Austrian finance ministers urged their colleagues from the ECP-11 to breathe new life into talks on the EU FTT and underscored their desire to see the tax introduced in 2016. The letter generally calls for a fresh start of ECP-11 talks regarding the scope and substance of the tax and a different working method, including more involvement of the European Commission. ECP-11 finance ministers will meet in the margins of the ECOFIN Council on January 27, after which more details should become available.
Bob van der Made (email@example.com)
Tel: +31 88 792 3696